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Heuberger v. Smith

United States District Court, N.D. Indiana, South Bend Division

September 7, 2017

JASON HEUBERGER, individually, and on behalf of others similarly situated, Plaintiff,
v.
HARRY L. SMITH d/b/a/ “MY-TRE GLAMMA MANAGEMENT, ” DESTINY MGT, INC., and DIAMOND PROPOERTIES MGMT, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          JON E. DEGUILIO JUDGE

         This is an action brought under the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. § 201 et seq., and the Indiana Minimum Wage Law (the “IMWL”), Ind. Code § 22-2-2-1 et seq., by Plaintiff Jason Heuberger (“Plaintiff”) against his employer, Mr. Harry Smith d/b/a My-Tre Glamma Management (“Glamma”), and two other companies, Destiny MGT, Inc. (“Destiny”) and Diamond Properties MGMT, Inc. (“Diamond”). [DE 1] Mr. Smith is the president of both Destiny and Diamond. [DE 24-1 ¶ 8] Between them, Defendants own and operate a total of nineteen McDonald's restaurants in Indiana. [DE 18-3]

         Plaintiff alleges that Defendants violated the FLSA (Count I) and the IMWL (Count II) by failing to pay him and similarly situated employees for their attendance at and participation in a mandatory orientation session. [DE 1 ¶¶ 1, 15, 31-50] Plaintiff further alleges that Defendants violated the FLSA (Count III) and the IMWL (Count IV) by deducting a “crew uniform clothing fee” of $2.00 from his and similarly situated employees' paychecks, which reduced the employees' wages to below the minimum wage level. [DE 1 ¶¶ 2, 21, 23, 51-73]

         Pending before the Court are two motions, filed only two days apart from one another: Defendants' Partial Motion to Dismiss Plaintiff's Complaint (the “MTD”) [DE 15]; and Plaintiff's Motion for Conditional Collective Action Certification Pursuant to 29 U.S.C. § 216(b) (the “§ 216(b) Motion”). [DE 18] Specifically, Defendants move to dismiss Counts II, III, and IV of Plaintiff's complaint pursuant to Fed.R.Civ.P. Rule 12(b)(6). [DE 15] Destiny and Diamond further move to dismiss the complaint in its entirety as it relates to them, pursuant to Fed.R.Civ.P. Rule 12(b)(1) for lack of standing. At the same time, Plaintiff requests that this Court certify subclasses of employees who participated in the alleged unpaid mandatory orientation, and whose wages were reduced by the crew uniform deductions.

         At the outset, Plaintiff admits that his state law claims under Counts II and IV are moot. [DE 25 at 1 n. 1] Therefore, the Court will dismiss those claims with prejudice and confine its analysis below to the remaining issues.[1]

         FACTUAL BACKGROUND

         Defendants Glamma, Destiny, and Diamond, own and operate a total of nineteen McDonald's franchise restaurants in Indiana. [DE 1 ¶ 1; DE 18-3; DE 24-1] Mr. Harry Smith owns and operates ten of these restaurants under the business name “My-Tre Glamma Management.” [DE 24-1 ¶ 3] Six of Glamma's restaurants are located in Elkhart, Indiana, while the remaining four are located in Middlebury, Goshen, and Wakarusa, Indiana. Id. Mr. Smith is also the president of both Destiny and Diamond. Id. ¶ 8. Destiny owns and operates one of the remaining nine restaurants, and Diamond owns and operates the other eight. [DE 18-3; DE 24-1 ¶¶ 6-7] None of the restaurants owned and operated by either Destiny or Diamond are located in Elkhart. Id. Plaintiff alleges that Defendants, together, form a “single employer” or “single integrated enterprise” and that they are “joint employers” because they jointly operate this chain of restaurants, and maintain interrelated operations, centralized control of labor, common management, common ownership, and common financial control. [DE 1 ¶ 11]

         In or about February 2016, Plaintiff was hired to work at one of these McDonald's restaurants, located at 130 N. Main Street, Elkhart, Indiana. [DE 1 ¶ 12; DE 24-1 ¶ 2] This restaurant is owned and operated by Glamma. [DE 18-3] Around the time of his hire, Plaintiff was required to participate in an unpaid orientation session at one of the six Glamma-owned McDonald's restaurants in Elkhart.[2] [DE 18-1 ¶ 4; DE 24-1, Exh. A] Plaintiff alleges that Defendants required their other hourly-paid employees to undergo this same unpaid orientation as a condition of employment. [DE 1 ¶ 14] Plaintiff's orientation generally consisted of filling out paperwork and going over his employer's policies. [DE 18-1 ¶ 6] At all times relevant, Plaintiff alleges that Defendants paid him and other employees the exact federal minimum wage of $7.25 per hour. [DE 1 ¶ 19]

         On or about May 1, 2016, the manager of the 130 N. Main Street restaurant, Amy Powers [DE 18-3], gave Plaintiff and other employees a memorandum, which stated that starting that same day, a $2.00 crew uniform clothing fee would be deducted from every paycheck. [DE 1 ¶ 20; DE 18-1 ¶ 8, Exh. B] That memorandum was entitled, “MY-TRE GLAMMA MANAGEMENT UNIFORM CONTRACT.” [DE 1 ¶ 20; DE 18-1, Exh. B] Plaintiff claims that, because he is paid at precisely the federal minimum wage, these deductions have caused his net wages to fall below the minimum wage. [DE 1 ¶ 21; DE 18-1 ¶ 9] Plaintiff further alleges that “[a]ll of Defendants' other hourly-paid minimum wage employees had similar experiences to those of Plaintiff” because “[t]hey are subject to the same ‘crew uniform clothing fee.'” [DE 1 ¶ 23] Plaintiff's own paychecks, however, indicate that no such deductions were ever taken from his wages. [DE 16-1; DE 24-1, Exh. E]

         Plaintiff brings this case as an “opt-in” collective action, and makes the following collective allegations regarding himself and all of Defendants' other hourly-paid employees: they have worked as hourly-paid employees for Defendants; they have been required to undergo two hours of mandatory “orientation” training for Defendants as a condition of their employment; they have not been paid for that orientation; they are and/or were paid the minimum wage; and they have been subjected to the same “crew uniform clothing fee, ” which decreases their net pay below minimum wage. [DE 1 ¶¶ 28, 30]

         It is against the backdrop of these facts that the Court conducts its analysis.

         DISCUSSION

         I. Plaintiff's § 216(b) Motion

         Plaintiff is essentially asking the Court to certify two subclasses of employees who worked at Defendants' restaurants. The first subclass relates to Plaintiff's allegations that Defendants failed to pay new employees for attending the mandatory orientation session (the “orientation subclass”). For these claims, Plaintiff proposes that “all current and former hourly-paid workers who worked at Defendants' McDonald's restaurants within the prior three years” be certified together. [DE 18 at 1] Second, with regard to his claims that Defendants paid their employees less than the minimum wage by deducting wages as part of a crew uniform fee, Plaintiff requests certification of “all current and former hourly-paid workers who worked at Defendants' McDonald's restaurants for the exact … minimum wage rate … at any time since May 1, 2016” (the “uniform deduction subclass”). Id.

         a. Collective Actions and the FLSA

         The FLSA requires employers to pay wages of at least $7.25 per hour to each of their employees. 29 U.S.C. § 206(a)(1)(C). Under 29 U.S.C. § 216(b), an employee may bring an action to recover unpaid minimum wages on “behalf of himself . . . and other employees similarly situated.” 29 U.S.C. § 216(b). This is known as a “collective action.” Harkins v. Riverboat Services, Inc., 385 F.3d 1099, 1101 (7th Cir. 2004). However, no current or former aggrieved employee may be a party plaintiff to a collective action “unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.” 29 U.S.C. § 216(b).

         Collective actions brought under the FLSA are fundamentally different than class actions under Fed.R.Civ.P. Rule 23. See Biddings v. Lake County, No. 2:09-cv-38, 2009 WL 2175584, at *2 (N.D. Ind. July 15, 2009). Plaintiffs in a collective action must “opt-in” to the action to be bound by a judgment while plaintiffs in a Rule 23 class action must “opt-out.” See Id. (citing King v. Gen. Elec. Co., 960 F.2d 617, 621 (7th Cir. 1992); Woods v. New York Life Ins. Co., 686 F.2d 578, 580 (7th Cir. 1982)). Because of the “opt-in” requirement, a representative plaintiff in a collective action must be able to inform other individuals who may have similar claims that they may join his lawsuit. See Biddings, 2009 WL 2175584, at *2 (citing Austin v. CUNA Mut. Ins. Soc'y, 232 F.R.D. 601, 605 (W.D. Wis. 2006)).

         Section 216(b) does not explicitly provide for court-ordered notice. 29 U.S.C. § 216(b). However, in appropriate cases, district courts have the discretion to implement § 216(b) by facilitating notice to potential plaintiffs. Hoffmann-La Roche, Inc. v. Sperling, 493 U.S. 165, 169-70, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). In fact, “trial court involvement in the notice process is inevitable in cases with numerous plaintiffs where written consent is required by statute, [and therefore] it lies within the discretion of the court to begin its involvement early, at the point of the initial notice, rather than at some later time.” Id. at 171. Such court-authorized notice serves the broad, remedial purpose of the FLSA and is in line with the court's interest in managing its docket, so long as the court takes care to avoid the appearance of judicial endorsement of the merits of the action. Id. at 172-74.

         Not only is the FLSA without instructions as to when courts should exercise their discretion and authorize notice to potential plaintiffs, it also does not define the term “similarly situated.” Biddings, 2009 WL 2175584, at *2. “In this circuit, district courts generally follow a two-step inquiry when certifying collective actions. In the first step, the Court must determine whether to conditionally certify an action as a collective action.” Williams v. Angie's List, Inc., No. 1:16-cv-878, 2017 WL 1546319, at *2 (S.D. Ind. Apr. 27, 2017). “The sole consequence of conditional certification is the sending of court-approved written notice to employees, who in turn become parties to a collective action only by filing written consent with the court.” Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 133 S.Ct. 1523, 1530, 185 L.Ed.2d 636 (2013) (internal citations omitted).

         At the first step, the Court considers “whether the representative plaintiff has shown that she is similarly situated to the potential class plaintiffs.” Austin, 232 F.R.D. at 605. The FLSA does not define the term “similarly situated” or instruct judges when to exercise their discretion and authorize notice to potential plaintiffs. District courts in this circuit typically apply the following analysis: to be similarly situated at the first step, the plaintiff needs to make only a modest factual showing that he and the potential plaintiffs were victims of a common policy or plan that violated the law. See, e.g., Bradley v. Arc of N.W. Ind., Inc., No. 2:14-cv-204, 2015 WL 2189284, at *2 (N.D. Ind. May 11, 2015) (citing Allen v. The Payday Loan Store of Ind., Inc., No. 2:13-cv-262, 2013 WL 6237852, at *1 (N.D. Ind. Dec. 3, 2013)); see also Camilotes v. Resurrection Health Care Corp., 286 F.R.D. 339, 345 (N.D. Ill. 2012). The Court analyzes the pleadings and any affidavits to determine whether that modest showing is made. Knox v. Jones Group, 208 F.Supp.3d 954, 958 (S.D. Ind. 2016).

         If the Court conditionally certifies a collective action and authorizes notice to potential participants, it proceeds to the second step in the certification process at the close of discovery and after the opt-in process is completed. Jirak v. Abbott Labs., Inc., 566 F.Supp.2d 845, 848 (N.D. Ill. 2008); Austin, 232 F.R.D. at 605. At that stage, the defendant can move to dismiss the “opt-in” plaintiffs in light of the record developed during discovery. Biddings, 2009 WL 2175584, at *3.

         i. Plaintiff is not “similarly situated” to the proposed uniform deduction subclass.

         The Court will address and dispense with the second of Plaintiff's proposed subclasses first. Plaintiff offers only two pieces of evidence in support of his request that the Court certify the proposed uniform deduction subclass. First, Plaintiff submits the memorandum given to him and other employees by his manager on or about May 1, 2016, which states that, starting that same day, “a $2.00 crew uniform clothing fee … will be deducted every paycheck.” [DE 18-1 ¶ 8, Exh. B]. Second, Plaintiff attests that “the deductions for ‘crew uniform clothing fees' have caused [his] net wages to fall below the federal and Indiana minimum wage.” [DE 18-1 ¶ 9] (emphasis added). The effect of Plaintiff's second statement, in particular, is to claim that those deductions were in fact taken out of his paychecks. Plaintiff makes this statement without attaching any of his paychecks.

         Plaintiff's paychecks, however, attached to Defendants' opposition to the § 216(b) Motion, paint a different picture. [DE 24-1, Exh. E] These paychecks cover consecutive pay periods from February 14, 2016, Plaintiff's first pay period [DE 18-1 ¶ 2], through the middle of September 2016.[3] [DE 24-1, Exh. E] As indicated by these paychecks, no deductions - let alone a “crew uniform clothing fee” - were ever subtracted from Plaintiff's wages. Id. Plaintiff was paid at the minimum wage rate of $7.25 per hour during each of these twelve pay periods, and additionally earned overtime pay at the rate of $10.875 per hour during four of them. Id.

         Although a more lenient standard applies at this early stage, “when presented with evidence which contradicts [Plaintiff's] claim” that Defendants had a practice and policy that violated the FLSA by deducting uniform fees, the Court “‘will not stick its head in the sand and ignore that evidence.'” Williams, 2017 WL 1546319, at *3 (quoting Hawkins v. Alorica, 287 F.R.D. 431, 441 (S.D. Ind. 2012)). It would be a waste of the Court's and the litigants' time to notify a class “only to later determine that the matter should not proceed as a class action because the class members are not similarly situated.” Id. Here, the authenticated paychecks clearly demonstrate that Plaintiff is not a member of the class which he wishes to represent; he and the potential plaintiffs are not “similarly situated” because no crew uniform deductions were actually taken from his paychecks. [DE 24-1 ¶ 22, Exh. E] Thus, he has not made a “modest factual showing that he and the other employees to whom notice is to be sent were victims of a common policy or plan that violated the law, ” Allen, 2013 WL 6237852, at *1, and the Court will deny his request to certify the uniform deduction subclass. See Weil v. Metal Techs., Inc., No. 2:15-cv-16, 2016 U.S. Dist. LEXIS 8100, at *27 (S.D. Ind. Jan. 25, 2016) (denying collective action certification for employees who had unpaid lunch breaks of twenty minutes or less where time records showed that named plaintiffs never took a lunch break of twenty minutes or less and therefore they were not harmed by the policy at issue); Strait v. Belcan Eng'g Grp., Inc., 911 F.Supp.2d 709, 731 (N.D. Ill. 2012) (denying collective action certification where named plaintiffs failed to identify any negative vacation recouped from their pay, any instances of forced leave without pay as to them, or improper furlough adjustments to their pay despite basing arguments for collective action on these theories).

         ii. The proposed orientation subclass is overbroad.

         The Court turns next to Plaintiff's proposed orientation subclass, and finds that it, as drafted, is overly broad. A proposed FLSA collective class can be overly broad. See e.g., Moss v. Putnam Cnty. Hosp., No. 2:10-cv-28, 2010 WL 2985301, at *2 (S.D. Ind. July 21, 2010) (limiting the proposed collective class to include only those plaintiffs compensated under the relevant overtime policy). Yet it is important to keep in mind that certification of a collective class is less demanding than certification of a class action under Rule 23, and does not require, “that the named representative's claims have the same essential characteristics as a class at large to achieve the initial certification.” Swarthout v. Ryla Teleservices, Inc., No. 4:11-cv-21, 2011 WL 6152347, at *5 (N.D. Ind. Dec. 12, 2011) (citing Brickel v. Bradford-Scott Data Corp., No. 1:09-cv-58, 2010 WL 145348, at *1 (N.D. Ind. Jan. 11, 2010)). Plaintiff need only provide the minimal showing that some identifiable factual or legal nexus binds the various claims of the class members in a way that hearing the claims together promotes judicial efficiency and comports with the broad remedial policies underlying the FLSA in order to justify notice at this stage of the proceedings. See Boyd v. Jupiter Aluminum Corp., No. 2:05-cv-227, 2006 WL 1518987, at * 5 (N.D. Ind. May 31, 2006). Despite this lenient standard, Plaintiff has failed to make a minimal showing of a nexus that “binds together” employees of Glamma with those of Destiny and Diamond.

         To support his argument for certifying the orientation subclass, Plaintiff only offers his own affidavit and the orientation checklist provided to him by his employer. [DE 18-1, Exh. A] In or about February 2016, Plaintiff was hired to work at a McDonald's restaurant located at 130 N. Main Street in Elkhart, Indiana. [DE 18-1 ¶ 2] That restaurant is owned and operated by Glamma; it is not owned or operated by either Destiny or Diamond. [DE 18-3] Plaintiff does not allege that he ever worked at any of the locations operated by Destiny or Diamond. Around the time of his hire, Amy Powers, general manager of the 130 N. Main Street restaurant, presented Plaintiff with an orientation checklist and informed Plaintiff that he had to complete the orientation program, which consisted of filling out paperwork and going over his employer's policies. [DE 18-1 ¶¶ 4-6; 18-3] Plaintiff maintains he was not paid for this two-hour orientation. Id. ¶ 6. The orientation was conducted at another Glamma location, 3429 S. Main Street, Elkhart, Indiana.[4] [DE 18-3; 24-1]

         Plaintiff argues broadly that his motion is supported by “Defendants' own form documents, ” which facially reflect a policy “not to pay for training [of] their employees.” [DE 18 at 10] (emphasis added). However, Plaintiff offers no evidence to support his assertion that all three defendants implemented this policy. Indeed, Plaintiff's own affidavit states, “I was required to participate” in unpaid training, and that Amy Powers “told me that I had to complete ‘Orientation.'” [DE 18-1 ¶ 4] (emphasis added). Plaintiff makes no mention of whether any other employees, let alone those working at Destiny and Diamond locations, underwent the same orientation. Similarly, Plaintiff does not attest to whether other hourly-paid employees even received the orientation checklist, which undermines his argument that it is a corporate form document imposing a mandatory practice across the board to employees of all three Defendants: “Amy Powers, store manager, presented me with a memo regarding ‘Orientation' ….” [DE 18-1 ¶ 4] (emphasis added). The orientation checklist does not indicate that it applies to or is used by all three Defendants, and the only information it contains relating to any of the three Defendants is the location of the orientation itself - a Glamma-owned restaurant. [DE 18-1, Exh. A] Thus, this is not the situation in which corporate documents evidence a “company-wide” application of unlawful policies across all three Defendants, as Plaintiff argues. Cf. Ravenell v. Avis Budget Car Rental, LLC, No. 08-cv-2113, 2010 WL 2921508, at *4 (E.D.N.Y. July 19, 2010) (certifying collective action where documents used nationwide by collective defendants revealed that all shift managers, “wherever located, were treated as part of a category of similarly situated employees”) (emphasis added). The Court will therefore amend the proposed orientation subclass to exclude employees of Destiny and Diamond.

         iii. The evidence supports certification of a limited version of the proposed orientation subclass.

         Though lenient, the “modest factual showing” standard is not a mere formality. Biddings, 2009 WL 2175584, at *3 (citing Flores v. Lifeway Foods, Inc., 289 F.Supp.2d 1042, 1045-46 (N.D. Ill. 2003) (evidence of defendant's payment practice concerning two out of fifty employees, without more, did not provide modest factual showing that the employer had a common policy or plan to violate the FLSA). The requisite showing may be accomplished by providing an affidavit, declaration, or other support beyond mere allegations in order to make a minimal showing of other similarly situated employees subjected to a common policy. Id. But, a plaintiff cannot rely on allegations alone to make the required “modest factual showing, ” unless the defendant admits that other similarly situated employees exist. Id. (citation omitted).

         Here, even though Plaintiff does not attest as to whether any other employees at the Glamma McDonald's were required to attend orientation, Mr. Smith, d/b/a Glamma and president of Destiny and Diamond, clarifies the scope of this practice. Mr. Smith's affidavit explains that “individuals seeking employment at one of the six My-Tre Glamma McDonald's located in Elkhart, Indiana are asked to attend a pre-hire ‘orientation' at … 3429 South Main Street….” [DE 24-1 ¶ 9] Only those applicants seeking employment at these six locations are given the orientation checklist and are required to attend this orientation. Id. ¶¶ 10-11. Individuals applying for positions at any of the other restaurants owned and operated by Defendants do not attend this orientation and are not provided the orientation checklist.[5] Id. ¶ 15.

         Mr. Smith's admissions provide enough evidence at this stage to support a finding that Plaintiff and similarly situated hourly-paid workers at the six Glamma McDonald's in Elkhart, Indiana, were subject to a common policy or plan that allegedly violates the FLSA - or more specifically, that those Glamma employees were not paid for participating in the mandatory orientation. Accordingly, given that Plaintiff's proposed collective action concerns similarly situated individuals and common issues of fact and law, and given the Court's interest in judicial efficiency and avoiding inconsistent results in related matters, the Court finds that a factual showing sufficient to satisfy step one has been met by Plaintiff as to this limited subclass. Consistent with the evidence, the Court will certify a subclass that includes only those hourly-paid workers at the six Glamma restaurants located in Elkhart, Indiana.[6]

         b. Proposed Collective Action Notice and Consent Form

         Once a collective action is conditionally approved, “the court has managerial responsibility to oversee the joinder of additional parties to assure that the task is accomplished in an efficient and proper way.” Hoffmann-La Roche, 493 U.S. at 170-71.

         In examining and approving any proposed notice, the Court must be careful to avoid the appearance of “judicial sponsorship” or a “judicial imprimatur.” Id. at 174; Biddings, 2009 WL 2175584, at *4; see also Woods v. N.Y. Life Ins. Co., 686 F.2d 578, 581 (7th Cir. 1982). Because of this, the Court will order that the case caption be removed from the notice and that the notice instead be placed on Plaintiff's attorneys' letterhead. See Alexander v. Caraustar Indus., No. 11-c-1007, 2011 U.S. Dist. ...


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